March 08, 2022

Ad Cost Companies

Consultants get to see profit and loss statements. They know what to look for when reviewing a p&l.

Because of my preference for marketing, I look at the ad cost line. There are two kinds of companies.

  1. Companies that spend their way to success or failure.
  2. Companies that find other ways to attract customers without selling souls to Google / Facebook / Others.
Every dollar wasted on ad spend is a dollar that doesn't flow through to the bottom line. It's the most simple aspect of the p&l to understand. If you don't waste money on marketing, you make more money.

Look at the p&l on the right ... when the wasteful brand spends 5% more ad spend than the smart brand but gets nothing for it.

Waste $4.25 million on ad spend and cost yourself $4.25 million in profit.

I worked with a client that spent more than 30% of net sales on marketing spend / ad spend. This was a poorly run business. The President of the company said to me ... "BUT WE HAVE TO SPEND THE MONEY TO GENERATE SALES". That's a classic sign that the President has no idea how companies generate sales WITHOUT spending money.

A VP/Marketing told me one that "IT'S GOOD FOR EVERY ORDER TO BE GENERATED BY MARKETING - I CAN SELL ANYTHING!" Good, glad you can. But when you quit or are fired, you leave the brand to somebody who can't sell anything ... and that's it for the brand.

The best companies understand profit ... and they understand that you don't want to spend money to make money unless their customer value simulations show sufficient downstream profit to warrant it.

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